Hold your breath and hope the governor is wrong
Strange in a time of financial and economic difficulty to have the Government and the governor of the Bank of England at loggerheads, yet perhaps not. Just as the prime minister and the chancellor breathe easier as they see the ‘market’ gradually lifting the value of the banks they have bailed out, along comes the governor to declare they need breaking up.
The opposition pretends the governor is singing their song. But then when you read the fine print, you find that George Osborne only supports Mervyn King’s call, if the international regulators make the same call. Indeed it is the very same international regulators that Gordon Brown relies upon to keep the mega banks exactly as they are.
Truth to tell, the UK has now anyway almost certainly passed beyond the point at which it could save one of the UK mega banks if it failed. Having splurged £175bn on flushing capital into the financial system with ‘quantitative easing’ – there’s nothing left to draw upon.
Yet two of these mega banks are owned by the UK tax payer already. Neither is yet behaving in any particularly different way from any other bank – at one level (politically) an unfortunate situation, at another (economically) something for which we can grateful – they may recover to a point at which we the taxpayers make a profit out of them!
Mervyn King is really signalling that he fears another failure and asking then what? No answer from either Government or opposition.
In the meantime, have you noticed the pound? As the poor old dollar slides, the pound strengthens, $1.66 as of yesterday and even against the strengthening Euro, it is itself stronger with £1 currently worth €0.90. We are in jumbly times, but there is a detectable thread of recovery which may put next year’s UK general election into a slightly different light, so long as the Governor’s worries are wrong. That’s a bit of a gamble in and of itself.